WestJet Airlines Ltd. turned down federal government support on Tuesday, a move that sets the carrier apart from rivals such as Air Canada and Transat AT Inc. at a time when airlines are ramping up competition for post-COVID-19 passengers.
Calgary-based WestJet has been in talks with the federal government for several months over financial support such as low-interest loans. On Tuesday, WestJet said in a news release: “Given encouraging vaccination rates across the country, both parties have mutually agreed to shift focus from these negotiations, and away from taxpayer-funded support, to leading the safe restart of the travel and tourism sector.”
“WestJet and the government of Canada remain open to resuming financial support discussions in the future,” the company said. WestJet is owned by asset manager Onex Corp., which acquired the airline in December, 2019, for approximately $5-billion, including debt.
Over the past three months, the federal government announced a series of support packages for other Canadian airlines. The government gave Air Canada access to $5.9-billion, while Transat received $700-million and Porter Aviation Holdings Inc. took $270.5-million in loans.
“Throughout the pandemic we have provided substantial support to Canada’s airlines and the tens of thousands of good middle class jobs this sector supports across the country,” Finance Department spokesperson Katherine Cuplinskas said in an e-mail. She said government aid included $2-billion in wage subsidies and $1-billion for airports and smaller airlines.
“At this time, the federal government and WestJet have mutually agreed to suspend constructive discussions regarding additional federal support for the airline. Should the need arise in the future, we remain open to reopening our discussions,” Ms. Cuplinskas said.
Canadian government funding came with strings attached, including equity stakes for Ottawa that diluted the holdings of existing business owners, caps on executive compensation and a commitment from carriers to offer refunds, rather than credits, for all flights cancelled during the pandemic.
Other countries also saw governments aggressively support airlines during the pandemic. Then-U.S. president Donald Trump provided U.S. carriers with a US$25-billion bailout in April, 2020.
WestJet announced it terminated talks with the Canadian government at a time when regulators around the world are easing travel restrictions. In recent weeks, WestJet and other carriers reinstated routes that were shut down during the pandemic and began aggressively marketing vacation travel with seat sales and advertising campaigns.
In June, for example, WestJet expanded service from Calgary to Amsterdam with its new Boeing 787 aircraft, and reconnected several Canadian cities the airline served mainly with its 737 jet fleet.
On Monday, the federal government announced Canada will open its border to fully vaccinated U.S. citizens on Aug. 9, ending a 16-month closing. The border will open to vaccinated people from elsewhere around the world a few weeks later.
John Gradek, an aviation lecturer at McGill University, said WestJet’s move to go it alone will “play very well in Western Canada.”
“They’ll say, ‘We didn’t need the government to survive. We did what we had to do to get us through this,’” Mr. Gradek said.
Jacques Roy, a professor of transportation at HEC Montreal, speculated WestJet was reluctant to accept government aid because, as a private company, it did not wish to share certain financial information, or offer ownership in exchange for aid, as Air Canada and Transat did.
The collapse of government talks leaves open the question of passenger refunds. WestJet has refused to give back money to customers who cancelled their own flights, although it said last fall it would provide refunds for flights the airline cancelled.
When the federal government announced it would launch talks to help the airline industry, it said aid would come with conditions that included customers getting their money back. The other major Canadian airlines accepted bailouts and are using government money to provide refunds for all customers.
“Everyone agreed the travellers should be reimbursed,” Prof. Roy said. “This has been a major issue. Everyone was complaining other countries’ airlines were reimbursing and we were not. Politically, it was difficult for the federal government not to make it easier for airlines to reimburse passengers. The best way to do this is to actually provide the money.”
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